New Century Cleaning Co. Ltd. v Church

Under Employment Rights Act 1996, wages properly payable may include sums arising from the employment relationship which are not strictly contractual. However, a reduction in a component used to calculate piecework wages is not necessarily an unauthorised deduction. The question is whether the worker had a legal entitlement to the higher amount, including through an express or implied contractual term or another legal source. On the facts found, the majority held that the employer was entitled to alter the workbill amount offered for regular jobs, so the resulting reduction was not a deduction from wages. A tribunal that hears evidence from one party must ordinarily allow the other party a proper opportunity to present relevant evidence.

New Century operated a collective piecework system under which window-cleaning teams were offered amounts for individual jobs and divided the resulting payment between team members. The company reduced established workbill amounts for regular jobs by 10 per cent. An Industrial Tribunal held that this amounted to an unauthorised deduction under sections 13 and 27 of the Employment Rights Act 1996. The Employment Appeal Tribunal upheld that conclusion and rejected the employer’s complaint that it had been prevented from calling evidence.

The employer appealed on two issues: whether the reduction was an unauthorised deduction, and whether the Industrial Tribunal had acted unfairly in refusing to hear the employer’s evidence.

1. Appeal allowed. The order of the Employment Appeal Tribunal was set aside, the originating application was dismissed, and costs were awarded to the employer.
2. By a majority, Morritt and Beldam LJJ held that section 13(3) required identification of wages legally payable on the relevant payday. Under section 27(1)(a), “or otherwise” extended protection beyond strictly contractual sums, but did not dispense with the need for a legal entitlement.
3. The majority held that the amount stated in the workbill for the relevant payment period was the amount properly payable. The 10 per cent reduction altered a component used in calculating the employee’s eventual wage. It did not itself constitute a deduction from wages. Sagar v Ridehalgh & Son Ltd was treated as recognising the distinction between reducing the rate for work and deducting from wages.
4. The majority rejected the implication of a contractual term preventing the employer from changing the amount offered for a regular job. The employment arrangements allowed teams to refuse jobs, involved separately negotiated job rates, and left the allocation of work and division of payment flexible. Devonald v Rosser established an obligation to provide a reasonable amount of work, but did not establish a fixed entitlement to the same rate for particular jobs.
5. All members of the court considered that the Industrial Tribunal had erred procedurally. Having heard evidence from the employee, it should have allowed the employer to call and test relevant evidence concerning the negotiability of workbill amounts and the commercial arrangements. The Employment Appeal Tribunal had therefore given inadequate reasons for rejecting that complaint.
6. Sedley LJ would have remitted the case for a fresh adjudication on complete evidence and, on the evidence then available, would have treated the reduction as an unauthorised deduction.

• Court of Appeal (Civil Division): [1999] EWCA Civ 1112. Appeal allowed with costs; the originating application was dismissed.
• Employment Appeal Tribunal: upheld the Industrial Tribunal’s decision that the 10 per cent reduction amounted to a reduction in wages properly payable and rejected the employer’s procedural complaint.
• Industrial Tribunal: held that the reduction was an unauthorised deduction under the Employment Rights Act 1996.